Romanian Real Estate market through experts’ quotes

CEDER Conference: A must attend event for Real Estate professionals

Part 1

(to read part 2, click here)

I was not so sure whether i should attend this event or not. My programme was quite busy and a deal ready to be finalized. Plus, you know… we receive announcements for so many events, almost every week. But reading the list of panelists and knowing how serious and well informed are some of them, I thought that it should be pity to lose CEDER 2010 last Wednesday. And I was right, it worthed every minute of my time and every cent of the ticket i paid, in order to access the event.

Just about 80 – 100 people were there, plus noone was recording. The level of discussion was very high, straight to the point, speakers were quite relaxed and the discussions were excellent. It is rare to attend such discussions, with so many top experts gathered in a room. I decided to share with you the most important quotes that i collected. But Iwill not tell you the name of the person who stated each quote, respecting their privacy.

Office market: dead or alive?

After a very interesting market presentation by Troy Javaher (JLL), we entered into the first panel discussion, regarding the office market.

The panel was joined by:

• Paul Phillips | CEO | Quintet
• Sven Lemmes | Managing Director | AIG/Lincoln
• Troy Javaher | Managing Director & Head of Capital Markets | Jones Lang LaSalle
• Stefan Oana | Country Manager | BlueHouse Capital
• Mihai Plaesu | Director | Black Sea Global Services
• Christopher Berlew | Managing Partner | Salans
• Dennis Selinas | Property & Private Equity Director | Capital Partners
• Florin Popa | Managing Partner | Vitalis Consulting
• Gerry Eastwood | Country Director | H&J Martin

Everyone insisted on the need of pre-leases, in order to start new developments. Eitherwise, everything is expected to remain almost frozen. Overall conclusion: "The market will rebound but not any time soon".

• "If you look in the property markets over the last 20 years, developers always were building during downtown, this is how they did their money".
• "The decision to start constructing or not is related to the progress of economy"
• "Construction prices will start rising. Also in the beginning of next year the number of developments is expected to increase".
• "Land prices were exaggerated and I don't think they have returned to where they should be, in order for the financial models to be approved by the banks.
• "So many buildings around the city with high vacancy…"

• "First question of every investor when he crosses the borders is "Where is my exist?"
• "To whom am I going to sell my investment 3-5 years?"
• "The problem of the market today is exactly that it does not provide a clear exit to investors".

• "Everyone says he rents using BOMA standards. If I take you to 10 buildings which say this, you will discover 10 different adaptations of these standards!"
• "In the last 18 months we had the time to discover many legal, technical and tax problems, which we were not aware of".

• "It's a common secret that now the hottest market for institutional investors is Poland. Our company's activity there stands at the levels of 2007".

• "Poland had lots of "internal Foreign Direct Investments", with polish emigrants returning and injecting money to the economy protecting it from the world crisis".
• "Infrastructure in Poland is much better than in Romania".
• "The office buildings in Pipera represent the best value for money in Europe nowadays. The only problem is that infrastructure delayed and people didn't go there".
• "What happened in Poland will not happen in Romania in the next 1-2 years; there are other markets more similar to Poland'.
• "I have confidence in Romania, it will return in 1-2 years but not as it used to be".

• "People expect yields here about 150 basis points (1,5%) more than Budapest".

• "Markets usually jump from bottoming up to falling, without following the phases of the clock".
• "An opportunistic Fund has to exit in 3-4 years and today this is very complicated in Romania. A core investor can wait".
• "An investment with annual yield of 8 – 8,5% on long term is excellent, but due to today's uncertainty many investors are afraid to move on".

• (Question by the audience): "Have you been able to identify the strength of your renting contracts comparing to other markets than Romania?"
• (Reply): "If you have a decent legal advice and you have organized yourself, more or less you will not have problems".
• "If someone doesn't have money to pay you and has no reason to stay at your place, you cannot prevent him from leaving".

Tomorrow:

• Industrial sector: Stuck in the slow lane
• On the edge: Retail developers playing a high stakes game